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SPECULATIVE MANAGEMENT SUNY series in the Sociology of Work and Organizations Richard H. Hall, editor SPECULATIVE MANAGEMENT Stock Market Power and Corporate Change Dan Krier State University of New York Press Published by State University of New York Press, Albany © 2005 State University of New York All rights reserved Printed in the United States of America No part of this book may be used or reproduced in any manner whatsoever without written permission. No part of this book may be stored in a retrieval system or transmitted in any form or by any means including electronic, electrostatic, magnetic tape, mechanical, photocopying, recording, or otherwise without the prior permission in writing of the publisher. For information, address State University of New York Press, 90 State Street, Suite 700, Albany, NY 12207 Production by Judy Block Marketing by Anne M. Valentine Library of Congress Cataloging-in-Publication Data Krier, Dan, 1965– Speculative management : stock market power and corporate change / Dan Krier. p. cm. — (SUNY series in the sociology of work and organizations) Includes bibliographical references and index. ISBN 0-7914-6349-4 (alk. paper) — ISBN 0-7914-6350-8 (pbk. : alk. paper) 1. Corporate governance—United States. 2. Corporate reorganizations— United States. 3. Corporations—Valuation—United States. 4. Speculation— United States. I. Title. II. Series. HD2741.K75 338.7—dc22 2005 2004045337 10 9 8 7 6 5 4 3 2 1 CONTENTS Figures and Tables vii Acknowledgments xi 1. The Speculative Management of Corporate Restructuring: Introduction and Overview 1 2. Transactional Finance in Late-Twentieth-Century America 30 3. Social Intermediaries and the Wave of Internal Corporate Restructuring in the Late Twentieth Century 62 4. Financial Accounting as a Social Intermediary 91 5. Social Intermediation, Corporate Governance, and Financial Markets 125 6. The Rise of Corporate Restructuring, 1984–1990 156 7. The Reign of Restructuring, 1991–1993 184 8. The Decline and Delegitimation of Restructuring, 1994–1997 208 9. The Speculative Management of Corporate Value: Summary and Conclusions 255 Notes 271 Bibliography 291 Index 311 v This page intentionally left blank. FIGURES AND TABLES Table 1.1 Occupational Losers and Winners during the Era of Restructuring: Total Employment in Selected Occupations, 1983–1997 9 Figure 1.1 Real Hourly Wages and Weekly Earnings during Age of Restructuring, 1970–1997 10 Figure 1.2 Productivity Gains during Era of Restructuring: Output per Hour and Percentage Increase in Productivity, 1970–1997 10 Figure 1.3 Income of U.S. Families during Late Twentieth Century: Upper Limit of Each Quintile and Lower Limit of Top 5 Percent 11 Figure 2.1 Median Net Worth of U.S. Households during the Era of Restructuring, 1989–1998 51 Figure 2.2 Stock Holdings as a Share of U.S. Households’ Financial Assets during the Era of Restructuring, 1989–1998 52 Figure 2.3 Percentage of U.S. Households with Direct and Indirect Holding of Stock during the Era of Restructuring, 1989–1998 53 Figure 2.4 Financial Assets of U.S. Households as a Percentage of their Total Assets during the Era of Restructuring, 1989–1998 54 vii viii FIGURES AND TABLES Figure 2.5 Median Value of Stock Holdings among U.S. Households with Stock, 1989–1998 55 Figure 2.6 Market Value and Number of Shares Traded on New York Stock Exchange durin